Friday, March 26, 2021

"SEC Upgrades Interest In SPAC Boom From ‘Passing’ To ‘Nearly Interrogatory’"

With the self-immolation of the SPACs that did Lordstown and Nikola we see two takeaways:

  1. The entire rationale of SPACs as vehicles for the sponsors to use their expertise evaluating private companies and the valuation thereof may leave a bit to be desired, due diligence-wise.
  2. Electric vehicles seem to attract folks who somewhere around age five crossed the line from dreamers to liars and scamsters.

From DealBreaker, March 25:

It has some questions for some banks that they can choose whether or not to answer, for now.

Last year was the year of the SPAC—for two-and-a-half months. Whatever happens from here out, 2021 will be the new year of the SPAC, as they’ve already raised $87.9 billion this young year, $4.5 billion more than last year and 6.5 times as much as in any prior year.

And things are, indeed, happening, like new SPACs popping up in new places and the hundreds of existing SPACs striking deals on a seemingly daily basis. But there are also things happening not generally associated with years designated the year of a thing, by which we mean bad things. Things like people saying, “huh, you think there are maybe already too many of these things?

First-day trading pops, or share price rises, for SPACs were commonplace earlier this year with gains rising to over 30% but have faded in March amid a broader sell-off in many companies that have agreed to go public through a SPAC merger.

All but one of the 15 SPACs that started trading this week closed below their initial public offering (IPO) price of $10 per unit on their first day of trading….

Bad enough, to be sure, and not likely to be improved by the fact that the Securities and Exchange Commission has upgraded its level of concern vis-à-vis blank-check companies from bemused, head-shaking quizzicality to ominous letters presaging future even more ominous letters.

The SEC asked the banks to provide the information voluntarily and, as such, did not rise to the level of a formal investigative demand, two of the sources said.

However, one of those two people said letters were sent by the SEC’s enforcement division, suggesting they may be a precursor to a formal investigation.

This person said the SEC wanted information on SPAC deal fees, volumes, and what controls banks have in place to police the deals internally. The second above source said the SEC asked questions relating to compliance, reporting and internal controls….